When Eminem’s publisher won its lawsuit with Universal Music over how to account for iTunes royalties, we expected a flood of similar litigation, possibly enough to seriously cripple the world’s largest record label. Universal Music insisted that Eminem’s deal was unique and the case was specific only to that, but so far, we’re seeing more and more musicians understanding the implications of the ruling, and filing similar lawsuits. If you don’t recall, the battle came down to the simple question of whether or not an iTunes sale was a sale or if it was a license. Amusingly, in almost all other legal contexts, Universal Music claims that when you “buy” a song at iTunes it’s just a license. But that proved to be UMG’s undoing here — because many of its old contracts had extremely different terms for royalties on “sales” and “licenses.”
Now, there’s a good reason for this. Historically, sales were of things like CDs, where Universal had relatively higher production, storage and distribution costs. So for “sales” (of CDs), the royalty to the musician was lower. “Licenses” generally referred to things like licensing a song for a movie or TV commercial. There, labels were willing to share higher royalties with the artist, and for good reason. The costs to the label of such a license were minimal, and licensing was always a relatively small part of the business.
But, of course, iTunes makes for a weird situation. The labels want to pretend it’s the same thing as selling a CD, and thus they’ve been paying the lower royalty rate. But, in other legal contexts they keep claiming that downloading a song from iTunes is not really a “sale” but merely a “license.” Thus, the basic legal claim from musicians is that for iTunes sales, they deserve the much higher royalty rate (usually closer to 50%, rather than 10% for sales). The court in the Eminem/FBT case said that iTunes songs were licenses… and thus the higher rates applied.
As we noted, when others started suing, this could lead to somewhere around $2 billion that the labels may need to pay out to artists, and the artists are noticing.
The latest to file suit is is Chuck D of Public Enemy, claiming that Universal owes him hundreds of millions of dollars.
What a surprise. When it suit shame it is a sale. When it doesn’t they call it a license. Except when they call it a license, they owe artists more money.
Hoisted by their own petard. Read the rest of the post to see just how outrageous their ‘deductions’ are before they calculate the royalty.
The artists gets $80 for every 1000 songs sold – by the company’s calculation based on a sale. Based on a license, they owe over $315.
Looks like the media companies rip everyone off. But they continue to act like they are the victims.